UK Smaller Companies was the top-performing IMA sector in the 2010/11 tax year, demonstrating the resilience of private companies amid ongoing economic turbulence.
The high-flying performance of smaller companies funds has prompted investment manager Hargreaves Lansdown to hail the 2010/11 tax period as the "year of the small caps".
According to the latest Lipper ratings, UK Smaller Companies leads the top-ten IMA sector chart with growth of 28% during the year in a sign small firms are poised to spearhead the country's private sector recovery.
"The success of UK smaller companies funds demonstrates stock markets and the economy are not the same thing," says Hargreaves Lansdown head of advice Danny Cox (pictured).
"Despite the public sector cuts and austerity measures, many companies in the UK are well positioned, profitable and able to benefit from this private sector and export lead recovery."
This year's IMA sector chart sees a significant shake-up at the top of the table compared to the 2009/10 tax year when Global Emerging Markets occupied the number one spot and UK Smaller Companies was in sixth position.
Global Emerging Markets has now slipped to eighth spot - behind UK Equity Income in seventh and UK All Companies in fifth position - suggesting risk-averse investors are seeking shelter from ongoing political turmoil in the Middle East and North Africa.
Elsewhere, Japan languishes at the foot of the bottom ten sectors chart owing to the fallout from last month's massive earthquake/tsunami and subsequent radiation scare.
"Over the long term we expect Japan to recover though in the short term there remains some uncertainly," says Hargreaves investment manager Ben Yearsley.
Also propping up the bottom of the table is Money Market as funds in this sector continue to struggle amid the low-interest rate environment.
Meanwhile, Standard Life UK Smaller Companies was one of the top selling ISA funds on the Vantage platform in March. Other high-flyers breaking into the top ten include Aberdeen Emerging Markets, Invesco Perpetual High Income, Artemis Income and Schroder UK Alpha Plus.
Clarke replacing Balkham
'Deep-dive analysis of client behaviour'
Ways to mitigate April’s increases
The best equity income funds examined